South Korea stocks plunge 5.2% as chip selloff hits KOSPI

South Korea’s KOSPI fell 395.76 points, or 5.17%, to 7,260.55 on Wednesday as a selloff in AI-related chip shares pushed the index more than 20% below its June record close, meeting a common threshold for a bear market.

The market opened lower, recovered to trade as much as 1.8% higher, then reversed and slid as much as 5.3% before a sidecar curb temporarily halted algorithmic trading to limit automated order flow.

Semiconductor heavyweights led losses. Samsung Electronics rose up to 1.4% in morning trade before ending the session down about 6.25%. SK Hynix climbed as much as 5.8% earlier and finished down roughly 3.59%.

The decline followed a steep overnight drop in U.S. chip stocks, with the Philadelphia Semiconductor Index down about 4.7%. Market participants also flagged volatility linked to newly launched single-stock leveraged exchange-traded funds tied to chipmakers.

Finance Minister Koo Yun-cheol pledged authorities would “closely monitor risk factors that could increase stock market volatility.” Deputy Finance Minister Moon Ji-sung predicted supply and demand dynamics in the dollar-won market “were expected to improve” in the second half of the year and highlighted expected demand for the won from SK Hynix’s planned U.S. share sale.

Foreign investors were net sellers for the session, offloading 487 billion won ($323.2 million). The pace of selling was smaller than in recent sessions when outflows reached the trillion-won level.

The South Korean won strengthened about 0.5% to 1,508.4 per dollar on the onshore settlement platform, after trading as strong as 1,505.2 earlier, its firmest intraday level since June 15.

Trading volatility has been elevated in recent days. Tuesday’s 4.9% drop triggered a circuit breaker, the sixth such activation this year and the 12th in the market’s history. Large swings in megacap semiconductor names have repeatedly contributed to instability and prompted closer regulator monitoring.

Analysts pointed to a reassessment of growth expectations for AI hardware and technical pressures from concentrated selling in megacap chip stocks. They also cited leveraged ETF activity and spillover from U.S. chip-market weakness as factors behind the sharp intraday moves that required trading curbs.

Some market participants still expect continued interest in high-bandwidth memory and AI supply chains tied to SK Hynix’s planned listing, but the KOSPI finished more than 20% below its June 22 record close of 9,114.55, meeting the common definition of a market downturn.